Sprint’s Pivot Dropped by All Cable Venture Partners

| Apr 25, 2008 | Wireless Services - U.S, Digital Home - U.S
| Competitive Intelligence Report

| Analysts: Bill Ho, Larry Hettick

Event Summary

April 24, 2008 – Sprint’s Pivot service that is now discontinued by Comcast, Time Warner Cable and Brighthouse only days after Cox stopped selling the service. The decision takes Sprint out as a supplier of wireless service for a quadruple play bundle, leaving AT&T and Verizon with the only quadruple play game in town. The demise of Pivot leaves the MSOs scrambling for a wireless strategy that comes at a time when consumers increasingly want mobile voice, data and video services.

Analytical Summary

• Current Perspective: Negative on Sprint’s Pivot discontinued by Comcast, Time Warner Cable and Brighthouse only days after Cox stopped selling the much anticipated product of the cable joint venture is by all accounts, a failure. Now instead of the much anticipated revenue opportunity and helping to further wireline defection from incumbent wireline providers, the partners do not have any wireless offering. The demise of Pivot leaves the MSOs scrambling for a wireless strategy that comes at a time when consumers increasingly want mobile voice, data and video services. As they contemplate this future, the AWS spectrum picked up in 2006 becomes a more attractive asset to offer their own wireless services. Still they are cable operators and have no wireless expertise.

• Vendor Importance: Very high on Sprint, which had an original 2005 investment of $100 million in the Pivot project (matching the combined investments of Cox, Time Warner Cable, Comcast and Advanced Newhouse / Brighthouse). Sprint needed the Pivot relationship to be successful because as consumers increasingly bundle services, Sprint owns no local loop access to provide wireline services and it now has limited options to offer integrated wireless and wireline services. The silver lining to the Pivot exit is that Sprint can now concentrate on other more important core business areas such as customer acquisition and Xohm launch.

• Market Impact - Wireless Services - U.S.: Very low on the wireless services market, because consumers have yet to fully embrace wireless and wireline entertainment/data services in a combined package, regardless of cable or local exchange providers.

• Market Impact - Digital Home Services - U.S.: High on the digital home services market, because even though consumers have not started to embrace wireless and cable data services in a combined package in large numbers, Sprint had taken a necessary step with Pivot toward expanding the value of the cable services bundles. Verizon and AT&T have both recognized the importance of a bundle that includes wireless voice, mobile data and mobile video—evidenced by the telcos’ recent improvements to integrated features for wireless and wireline voice, data and video along with the bundle discounts applied when a wireless element is included in an AT&T or Verizon multi-service bundle.

Recommended Competitor Actions

• AT&T and Verizon need to improve their wireless and wireline integration to take advantage of the cable companies’ lack of a wireless asset. For example, services such as AT&T Video Share should be accessible over a wireless device, a PC, and a television screen.

• AT&T should point out that its Unity plan offers superior unlimited mobile calling between to over 100 million AT&T residential and wireless on the AT&T network, no longer require customers to buy AT&T residential landline long distance service, and come with Rollover wireless minutes – besting any Pivot calling plan to date.

• AT&T and Verizon need to emphasize their double and triple play packages that don’t include a wireline voice element, meeting needs of the growing numbers customers who want to substitute wireless voice for traditional home phones. In Q1 2008 about half of AT&T customers that bought DSL without a wireline phone also bought an AT&T wireless service as part of the package.

• T-Mobile should target its existing customers that live in former-Pivot cities for its Talk Forever Home Phone whenever it goes national because cable companies enjoy winning market penetration with a video / data double play but now have no wireless plan to sell customers who are willing to give up traditional phone service.

Recommended End User/Customer Actions

• Pivot Customers should ask their cable providers for a detailed explanation about what will happen with their Pivot service and their options with or without Sprint for a new service. While the MSO Pivot partners have made a few comments to the press, Pivot has simply disappeared from company Web sites and the former providers have yet to release any official notices, although they have provided some limited insights through news services.

• Since Pivot customers aren’t being disconnected, they should know that their phone service still works.

• Pivot customers who want a bundle that includes wireless should look at the packages available from AT&T and Verizon that include some feature integration, free mobile-to-home calling (with AT&T Unity) and bundle discounts applied when buying a wireless service .

• T-Mobile customers who buy their wireline bundled service from Comcast, Time Warner Cable, or Brighthouse should consider the T-Mobile Talk Forever Mobile and the Talk Forever Home Phone plans each for $10 per month with a voice plan if they are interested in reducing the cost for either wireless minutes or if they want to substitute a wireless service for their existing wireline home phone.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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